{"id":16221,"date":"2013-01-09T01:58:02","date_gmt":"2013-01-09T09:58:02","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=16221"},"modified":"2013-01-09T01:58:02","modified_gmt":"2013-01-09T09:58:02","slug":"t2108-update-130108","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2013\/01\/09\/t2108-update-130108\/","title":{"rendered":"T2108 Update (January 9, 2013) &#8211; Technical Tensions Build As Extreme Overbought Conditions Persist"},"content":{"rendered":"<p>(T2108 measures the percentage of stocks trading above their respective 40-day moving averages [DMAs]. It helps to identify extremes in market sentiment that are highly likely to reverse. To learn more about it, see my <a href=\"http:\/\/www.drduru.com\/money\/T2108.htm\">T2108 Resource Page<\/a>. You can <a href=\"http:\/\/twitter.com\/#!\/search\/%23T2108\">follow real-time T2108 commentary<\/a> on twitter using the #T2108 hashtag. T2108-related trades and other trades are posted on twitter using <a href=\"http:\/\/twitter.com\/#!\/search\/%23120trade\" target=\"_blank\">the #120trade hashtag<\/a>)<\/p>\n<p><strong>T2108 Status<\/strong>: 81.5% (5th overbought day)<br \/>\n<strong>VIX Status<\/strong>: 13.6<br \/>\n<strong>General (Short-term) Trading Call<\/strong>: Initiate SMALL short positions, sell some longs<\/p>\n<p><strong>Reference Charts<\/strong> (click for view of last 6 months from Stockcharts.com):<br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$SPX&#038;p=D&#038;st=2012-07-08&#038;en=2013-01-08&#038;id=p14085208538\" title=\"6-month chart of the S&#038;P 500\" target=\"_blank\">S&#038;P 500<\/a> or <a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=SPY&#038;p=D&#038;st=2012-07-08&#038;en=2013-01-08&#038;id=p14085208538\" title=\"6-month chart of SPY\" target=\"_blank\">SPY<\/a><br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=SDS&#038;p=D&#038;st=2012-07-08&#038;en=2013-01-08&#038;id=p15880085697\" title=\"6-month chart of SDS\" target=\"_blank\">SDS<\/a> (ProShares UltraShort S&#038;P500)<br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$USD&#038;p=D&#038;st=2012-07-08&#038;en=2013-01-08&#038;id=p25615696567\" title=\"6-month chart of the U.S. dollar\" target=\"_blank\">U.S. Dollar Index<\/a> (volatility index)<br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$VIX&#038;p=D&#038;st=2012-07-08&#038;en=2013-01-08&#038;id=p25615696567\" title=\"6-month chart of the VIX\" target=\"_blank\">VIX<\/a> (volatility index)<br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=VXX&#038;p=D&#038;st=2012-07-08&#038;en=2013-01-08&#038;id=p15880085697\" title=\"6-month chart of VXX\" target=\"_blank\">VXX<\/a> (iPath S&#038;P 500 VIX Short-Term Futures ETN)<br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=EWG&#038;p=D&#038;st=2012-07-08&#038;en=2013-01-08&#038;id=p15880085697\" title=\"6-month chart of EWG\" target=\"_blank\">EWG<\/a> (iShares MSCI Germany Index Fund)<br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=CAT&#038;p=D&#038;st=2012-07-08&#038;en=2013-01-08&#038;id=p15880085697\" title=\"6-month chart of CAT\" target=\"_blank\">CAT<\/a> (Caterpillar)<\/p>\n<p><strong>Commentary<\/strong><br \/>\nSomehow, the S&#038;P 500 remains extremely overbought despite meandering ever so slightly lower. I assume that the persistence of extreme overbought conditions at the resistance of multi-year highs indicates that a spring is still winding tighter and tighter, ready to burst upward or downward with a well-placed catalyst.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_16223\" aria-describedby=\"caption-attachment-16223\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/01\/130108_SP500.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/01\/130108_SP500.png\" alt=\"The S&amp;P 500 bides its time as traders await a resolution to an extreme overbought condition\" title=\"The S&amp;P 500 bides its time as traders await a resolution to an extreme overbought condition\" width=\"500\" height=\"350\" class=\"size-full wp-image-16223\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/01\/130108_SP500.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/01\/130108_SP500-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-16223\" class=\"wp-caption-text\">The S&P 500 bides its time as traders await a resolution to an extreme overbought condition<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>In the meantime, the volatility index, the VIX, continues to trickle ever so slightly downward. It still looks ready to take a quick plunge lower before finally turning higher again (which I have stated in earlier posts seems highly likely within a month). This low VIX is adding to the tension building in the market.<\/p>\n<p>There are three other indicators that are trading on the edge of important trendlines: the Australian dollar (FXA), gold (GLD), and the dollar index. I am long overdue to update the on-going relationship between the Australian dollar and the S&#038;P 500. In the meantime, I think this relationship is alive and well. AUD\/USD continues to trade right at the edge of a downtrend in place ever since the currency pair&#8217;s all-time high set in 2011. <a href=\"http:\/\/seekingalpha.com\/article\/1097331-don-t-overplay-the-recovery-in-iron-ore-prices\" target=\"_blank\">I have argued that this downtrend will hold<\/a>, but if it does not, I expect it will be accompanied by a fresh surge higher in the S&#038;P 500.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_16225\" aria-describedby=\"caption-attachment-16225\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/01\/130109_AUDUSD.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/01\/130109_AUDUSD.png\" alt=\"The Australian dollar continues to linger around the downtrend from its all-time high\" title=\"The Australian dollar continues to linger around the downtrend from its all-time high\" width=\"500\" height=\"350\" class=\"size-full wp-image-16225\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/01\/130109_AUDUSD.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/01\/130109_AUDUSD-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-16225\" class=\"wp-caption-text\">The Australian dollar continues to linger around the downtrend from its all-time high<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>Gold&#8217;s breakout last August in anticipation of QE3 came to an end in November as it retested the 200DMA. A fresh bounce essentially failed at the 50DMA and now gold, as represented by the SPDR Gold Trust (GLD), is struggling to hold onto the 200DMA support. I remain as bullish as ever on gold, but I think further selling from here could gather momentum quickly. <\/p>\n<p><center><br \/>\n<figure id=\"attachment_16226\" aria-describedby=\"caption-attachment-16226\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/01\/130108_GLD.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/01\/130108_GLD.png\" alt=\"GLD clings to support at the 200DMA\" title=\"GLD clings to support at the 200DMA\" width=\"500\" height=\"350\" class=\"size-full wp-image-16226\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/01\/130108_GLD.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/01\/130108_GLD-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-16226\" class=\"wp-caption-text\">GLD clings to support at the 200DMA<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>Related to AUD\/USD and GLD, the dollar index is once again knocking at the 200DMA. A breakout in November was surprisingly brief. I think another breakout here will be sustained. In previous posts, I have demonstrated how the dollar index tends to sustain large rallies\/sell-offs once it breaks the 200DMA up\/downward.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_16227\" aria-describedby=\"caption-attachment-16227\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/01\/130108_DXY0.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/01\/130108_DXY0.png\" alt=\"The dollar index threatens once again to break out against 200DMA resistance\" title=\"The dollar index threatens once again to break out against 200DMA resistance\" width=\"500\" height=\"350\" class=\"size-full wp-image-16227\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/01\/130108_DXY0.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/01\/130108_DXY0-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-16227\" class=\"wp-caption-text\">The dollar index threatens once again to break out against 200DMA resistance<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>These are all trends\/transitions worth watching as we wait for the market to make its next (explosive) move&#8230; <\/p>\n<p><strong>Daily T2108 vs the S&#038;P 500<\/strong><br \/>\n<img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/www.drduru.com\/money\/charts\/T2108-daily_s.png\" width=\"500\" height=\"350\" alt=\"T2108 vs. the S&#038;P 500 (DAILY)\" title=\"T2108 vs. the S&#038;P 500 (DAILY)\"><\/p>\n<p>Black line: T2108 (measured on the right); Green line: S&#038;P 500 (for comparative purposes)<br \/>\n<\/center><\/p>\n<p><center><br \/>\n<strong>Weekly T2108<\/strong><br \/>\n<a href=\"http:\/\/www.drduru.com\/money\/charts\/T2108-weekly_s.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/www.drduru.com\/money\/charts\/T2108-weekly_s.png\" width=\"500\" height=\"350\" alt=\"Weekly T2108\" title=\"Weekly T2108\"><br \/>\n*<strong>All charts created using <a href=\"http:\/\/www.freestockcharts.com\/\" title=\"Freestockcharts.com\" target=\"_blank\">freestockcharts.com<\/a><\/strong> unless otherwise stated<\/a><br \/>\n<\/center><\/p>\n<p><strong>Related links:<\/strong><br \/>\n<a href=\"http:\/\/www.drduru.com\/money\/T2108.htm\">The T2108 Resource Page<\/a><br \/>\n<a href=\"http:\/\/www.drduru.com\/money\/charts\/T2108-daily.jpg\">Expanded daily chart of T2108 versus the S&#038;P 500<\/a><br \/>\n<a href=\"http:\/\/www.drduru.com\/money\/charts\/T2108-weekly.jpg\">Expanded weekly chart of T2108 <\/a><\/p>\n<p>Be careful out there!<\/p>\n<p>Full disclosure: long VXX shares and puts; long SSO puts, long GLD<\/p>\n","protected":false},"excerpt":{"rendered":"<p>(T2108 measures the percentage of stocks trading above their respective 40-day moving averages [DMAs]. It helps to identify extremes in market sentiment that are highly likely to reverse. To learn more about it, see my T2108 Resource Page. You can follow real-time T2108 commentary on twitter using the #T2108 hashtag. T2108-related trades and other trades &#8230; <a title=\"T2108 Update (January 9, 2013) &#8211; Technical Tensions Build As Extreme Overbought Conditions Persist\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2013\/01\/09\/t2108-update-130108\/\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[199,921,20,512,135,511,62,21],"tags":[308,310,299,309,200,24,65,284,226,1597,1591],"class_list":["post-16221","post","type-post","status-publish","format-standard","hentry","category-commodities","category-downtrend","category-forex","category-resistance","category-stock-market-trading","category-support","category-technical-analysis","category-u-s-dollar","tag-audusd","tag-australian-dollar","tag-dxy0","tag-fxa","tag-gld","tag-gold","tag-sp-500","tag-spdr-gold-shares","tag-t2108","tag-technical-analysis","tag-u-s-dollar"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>T2108 Update (January 9, 2013) - Technical Tensions Build As Extreme Overbought Conditions Persist - ONE-TWENTY TWO: Trading Financial Markets<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/drduru.com\/onetwentytwo\/2013\/01\/09\/t2108-update-130108\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"T2108 Update (January 9, 2013) - Technical Tensions Build As Extreme Overbought Conditions Persist - ONE-TWENTY TWO: Trading Financial Markets\" \/>\n<meta property=\"og:description\" content=\"(T2108 measures the percentage of stocks trading above their respective 40-day moving averages [DMAs]. 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